Fundamental Overview
The USD last week lost ground across the board following the soft US CPI report as the market priced back in two rate cuts by the end of the year. The moves were reversed soon after though as we got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed expected just one cut for this year despite the soft US CPI report.
Fed Chair Powell backpedalled on the projections nonetheless making them a bit less worrying as the central bank remains very data dependent. The rally in the US Dollar eventually picked up steam as the risk sentiment turned more cautious.
The EUR, on the other hand, got hit hard by the European elections as the political uncertainty weighed on the sentiment and led to some increase in bonds risk premia and selloff in European stocks. The drop in the pair led to a break below a key support that eventually exacerbated the selloff.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD broke through the key 1.0727 support zone and increased the bearish momentum as the sellers piled in more aggressively. If the sellers remain in control, the next target should stand around the 1.06 handle. A break below the 1.06 handle would open the door for a drop into the key 1.05 level which is basically the bottom of the range since late 2022.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we are seeing a pullback which might end up in a break and retest pattern on the 1.0727 resistance where we can also find the 38.2% Fibonacci retracement level for confluence.
This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the 1.06 handle with a better risk to reward setup. The buyers, on the other hand, will want to see the price rally back above the resistance to gain more control and start targeting the trendline around the 1.08 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have also a minor downward trendline around the 1.0727 level which should technically strengthen the resistance. A breakout to the upside should increase the bullish momentum into the next trendline at the 1.08 handle. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the US Retail Sales and US Industrial Production. On Thursday, we get the US Housing Starts and Building Permits data and the latest US Jobless Claims figures. On Friday, we conclude the week with the Eurozone and US PMIs.